Oil companies to take subsidy hit

Soma Banerjee, TNNJul 13, 2004, 02.20am IST

NEW DELHI: The Budget's failure to walk the talk on the government footing a larger part of the subsidy bill on cooking gas and kerosene means that the oil company bottomlines will bear the brunt. For one, the Budget support has been retained at the interim Budget's Rs 3,500 crore.

This translates to a subsidy of Rs 22 per cylinder against the existing Rs 80 plus.

Also, the government's claims of putting in place a transparent mechanism to provide subsidies has not translated into policies.

The government has made a bid to reduce the under-recoveries of the oil companies on cooking gas by slashing excise duty to 8% and allowing tincrease in retail prices by Rs 20 a cylinder.

The government has fixed the subsidy on LPG based on global prices ($185 per tonne) prevailing in 2002-03. However, the price of cooking gas has shot through the roof in the last two years and is now ruling at a high of $320 per tonne, a hike of almost 73%.